70410-A-9784M-048 On 10 April, 2007 at Bldg # 1537, Fort McCoy, WI. Grand Opening and Ribbon Cutting Ceremony took Place for the new Commissary. Photo by Michael Mickelson, DPTMS, Fort McCoy, WI. Publication or commercial use of this material requires a release by a U.S Army public affairs officer. Credit U.S. Army photograph. WO#07-01137
Washington, DC, (CNN) - A military family could see grocery bills go up by $3,000 a year under the latest Pentagon budget proposal.
Grocery stores for military families, also called commissaries, will be able to offer fewer savings over the next three years as the Department of Defense would slash most of the taxpayer subsidies that prop up these stores, according to the plan released Monday.
Each year, $1.4 billion in taxpayer dollars go to 178 commissaries nationwide and 67 located overseas. The Department of Defense plans to slash $1 billion of those subsidies, mostly affecting the U.S. stores.
The cuts are part of a broader budget plan that aims to make the armed forces leaner and more responsive to threats like cyber attacks from China than land wars in the Middle East.
Besides paring back grocery savings, the Pentagon would also cap military pay raises at 1% in 2015 and trim housing subsidies for families who don't live on bases. They will also no longer be reimbursed for rental insurance.
Families are likely to feel the sharpest pain every week when they shop for their grocery. By the end of the third year, the savings will be slashed by about two-thirds, a senior defense official acknowledged on Monday.
Currently, a family of four can save $4,500 a year at commissaries on average, according to the Defense Commissary Agency, which puts savings around 30% compared to retail grocery stores. Under the new proposal, the savings for a similar family would be closer to $1,500 a year or 10% of a grocery bill at other stores.
Still, it's better than having the military grocery close altogether, which had been the rumor last year.
"We are not shutting down commissaries," said Secretary of Defense Chuck Hagel on Monday. "All commissaries will still get free rent and pay no taxes.
Military families prefer shopping at commissaries and are often reluctant to shop elsewhere since they not only end up paying more, but also have to drive long distances away from their base camps.
Their reliance on these stores was apparent on Oct. 1 -- right before the federal shutdown -- when commissaries sold $30.6 million worth of goods, more than double the usual daily volume, according to the Defense Commissary Agency.
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Groups that advocate for military families said the cuts are bad news and could mean higher costs than the defense agency predicts.
"It's a huge hit for families," said Kathleen Moakler, government relations director for the National Military Family Association. "This helps our families supplement their pay."
Pentagon officials plan to keep subsidies for some overseas military groceries and a few rural ones, where "it's harder for somebody to drive out of town and search for a competitor," a senior defense official explained on Monday